On 10-1-2025, the Securities and Exchange Board of India issued a circular revising and revamping the Nomination Facilities in the Indian Securities Market to prevent the generation of unclaimed assets in the securities market. The provisions will come into force on 1-3-2025.
Key Points:
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The Regulated Entities will have to comply with the following:
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Rule of Survivorship:
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In case of demise of a joint-account holder, the regulated entity will transmit the assets held to the surviving account holders vide name deletion.
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The assets received by the surviving account holders will be treated as ownership and not a trustee.
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Surviving joint holders will be entitled to continue with/ change/ cancel the nominations made previously.
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The mode of operation will be unaffected by the rule of survivorship.
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The norms applicable for operation of the account / folio shall be mutatis mutandis applicable for nomination.
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Simultaneous passing away of joint holders:
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In case of demise of all joint holders simultaneously, the regulated entity will transmit the assets in the account/ folio to the registered nominees for effecting its due discharge.
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In case there are no nominees, the regulated entity will transmit the assets in the account/ folio to either:
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Legal heir/ legal representative of the youngest of the joint holders;
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As per the will.
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In case the account is held by a Hindu Undivided Family (‘HUF’), the new Karta will be entitled to operate the account/ folio upon the death of the Karta as recorded.
In case no new Karta has been constituted under the applicable laws, the regulated entity will affect transmission of account as per dissolution deed.
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The nominees will receive the assets of the deceased sole account as trustee on behalf of the legal heirs.
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In case the nominee predeceases the investor, the legal heir of nominee will not be eligible to inherit the assets.
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The nomination will be mandatory for single holding only.
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In case of demise of one of the nominees prior to the demise of the investor, and if there is no change in the nomination, then the assets will be distributed to the surviving nominees on pro rata basis.
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In case subsisting credit facilities is secured by a duly created pledge, the regulated entity will obtain due discharge from the creditors prior to the transmission of assets to the nominees/ legal heirs.
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Revamped Norms:
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Investors will have to provide the following:
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PAN/ Driving License/ last 4 digits of Aadhaar;
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Contact details of nominees;
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Relationship with the nominee;
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Date of birth of nominee in case the nominee is a minor.
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The maximum number of nominations by the investors can be 10.
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Holder of the Power of Attorney cannot nominate.
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In case of transmission of joint accounts, the nominees can either continue as joint holders or own a separate single account for their respective portion.
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Nominee can also act on behalf of the incapacitated investors. The regulated entity can provide investors having single account to:
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Empower any one of the nominees to operate if the investor is physically incapacitated.
Minor nominees are an exception to this norm.
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Specify percentage/ absolute value of assets in the account that can be encashed by nominee.
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Change the mandate of any number of times without restriction.
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Direction to Asset Management Company/ Registrar and Transfer Agents and Depository Participants in case of incapacitated investor:
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Upon receipt of intimation, an officer for the regulated entity will visit such investor in person.
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Such intimation should be accompanied by a medical certificate.
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The officer will have to ascertain that the investor has the capacity to contract.
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The officer will obtain a thumb/ toe impression depending upon the nature and degree of incapacitation.
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Any encashment will have to be credited only to the bank account linked to the account of the investor.
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Request for change in bank account/ email address/ mobile number by such nominee will not be allowed.
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A standard Operating Procedure will be constituted to have uniformity in dealing with incapacitate investors and those with special needs or sick or old investors.
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Requirements for transmission to nominee:
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Self-attested copy of Death Certificate of the deceased investor.
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Due completion, updating/ reaffirming of the KYC of nominees.
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Due discharge from the creditors if there are subsisting credit facilities secured by a duly created pledge.
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In case of transfer to legal heirs from nominees, a declaration has to be obtained from the nominee.
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Regulated entities will have an online mechanism, which will include OTP system, for existing and new investors who want to opt out of nomination.
